How to start a gift shop
A business idea to get wrapped up in: Check out our concise guide to launching and running a brilliant gift shop company
When starting a gift shop, things to think about are:
What is a gift shop business?
We all like getting presents. Admit it. Even if you're someone who tells their friends not to bother with a birthday present, you still feel a tinge of excitement when that gift-wrapped package inevitably finds its way into your hands.
Giving gifts is a tradition that spans all sections of society, no matter what age group, income group or region of the UK, helping celebrate almost every major occasion of the year.
And on top of the domestic market, the gift industry in this country is also boosted by the tourist trade. Planeloads of foreign visitors come to Britain each year to visit our seaside resorts, stately homes and historic cities, and most of them will want a souvenir to take home.
So if you're someone who adheres to the adage that it's better to give than to receive, you will have undoubtedly spent many hours in gift shops searching for the ideal present. But have you ever thought what it would be like on the other side of the counter?
It is extremely difficult to define the gift retail sector for the simple reason that it is almost impossible to restrict the definition of a gift. From CDs to theatre tickets, plants to cuddly toys, anything can be bought and given as a present.
In fact, as more high-street retail outlets set up gift services and add gift products to their core range, the market is becoming increasingly fragmented.
Nevertheless, three distinct breeds of pure gift shop still survive:
- Traditional gift shop: Stocking a range of local products, often drawing on the reputation of the area. Also may stock traditional gifts such as candles and soaps.
- Design-led gift shop: Stocking well-designed gifts and accessories, often at the higher end of the price bracket.
- Card gift shop: Placing a much greater emphasis on cards with a smaller selection of gifts. High-street chains dominate this sector.
The market for gift giving in the UK is so popular that an entire industry sector has developed to serve it. Manufacturers and specialist suppliers serve thousands of gift retailers scattered throughout Britain, selling gifts of every description.
According to the Giftware Association (GA), the national trade body for the UK gift industry, the sector is worth an estimated £10bn per year. The gift market is large and there is potential for considerable profit.
Who is a gift shop owner?
“It's a very broad range of people who come into the sector. Basically, people from all backgrounds and any career. But there is also quite a high turnover gift shop owners, since many people start but then realise it is not for them,” says Isabel Martinson, chief executive of the GA.
Your basic role as a gift shop owner will be that of a shopkeeper. Running the shop you will be responsible for sourcing and negotiating the buying of stock from suppliers, displaying and promoting the stock in your shop and selling it to customers.
This sounds simple enough, but how well you manage the varying areas of your shop will be the difference between success and failure.
Firstly, you will be responsible for stocking your shop. You will be sourcing products from a range of different suppliers and even different countries, but you will need to make sure that everything you buy is in keeping with the scheme of the shop.
Customers will expect to find certain types of gifts depending on your shop's image – whether it is high quality accessories or tacky toys and joke items. This requires a keen eye for detail and being very disciplined about the items you buy in.
“The good design-led gift stores are run by people who are thoroughly interested in the product – how it works, what it does, what it looks like and how it fits into the shop as a whole,” explains Guy Thompson, managing director of Obsessions, an independent chain of three gift shops in London.
He adds that it takes are degree of self-assuredness to maintain the character of your shop, “You have to be very strong, because lots of agents will come to sell their products to you. You often have to say, “Thanks, it's a nice product but it's not what I'm looking for.” Too often people make a £300 order just to get rid of the agent.”
Like all retail outlets, you will have to display items in an attractive way that compliments the style of the shop with an appealing atmosphere that encourages shoppers to browse.
Anybody working in retail should be sociable and enjoy meeting members of the public. Running a gift shop may involve more interaction than other businesses, however, since customers browsing for gifts often need ideas or encouragement about what to buy.
Neil Anderton converted a redundant barn into a gift shop on his farm in Scorton near Preston. He believes that a warm atmosphere is key. “The ladies who work here are very good at welcoming people as they come in, chatting to them and asking them where they come from. This is very important. People come back every week because we make them feel welcome.”
Finally you will have to learn the commercial skills that are essential when running any business. A basic understanding of marketing, accounting and management for example, will be crucial.
Finding stock for your gift shop
The single most important aspect of a gift shop is its goods. The quality and range of your products will be the rock on which your shop's reputation, and therefore its client base, is founded, so you must get it right from the start.
There are a number of trade fairs throughout the country which you can visit when looking for stock, the largest of which is the Spring Fair in Birmingham (for full listing of trade fairs visit the GA website).
Your stock composition will depend greatly on the location of your business and the profile of your customers. Tourists will want local specialities and may not be as adverse to tacky designs than local customers looking for quality gifts.
However, finding products isn't generally the problem, as Thompson explains. “There are lots of suppliers out there. The problem is turning the different products into a coherent range – being selective and rigorous with products, knowing what you want and sticking to your guns. The successful shops are the ones with a strong vision.”
Catering – and marketing – to your customers
It is important to stock products that can't be found anywhere else. Cameron Donnelly, who co-owns with his wife the Imray Gift Shop in Fort Augustus, explains, “If you're starting off a gift shop, you've really got to have something different. We decided to have a large part of the shop full of cross-stitching kits (a needlework hobby). One of the most important aspects of this is that we have virtually no competition.”
Isabel Martinson agrees, “It's a lot to do with being professional and staying ahead of the market to ensure that you have something special that shoppers won't find in the high street.”
Also remember that business in a tourist area will be very seasonal. To ensure that your business doesn't fail in the off-season, you may need to give local residents a reason to visit your shop as well.
Anderton's gift shop, for example, has a coffee bar, and he also offers tours of the farm and surrounding gardens. “It's all part of the experience,” he explains, “They do the tour and then they are back in the coffee shop, having a coffee and scones and buying gifts.”
If you target the tourist market, your location will be crucial in catching as many visitors to the area as possible. A gift shop with a domestic market, however, will rely less on its position.
“Location is secondary to having a good mix of product,” says Thompson. “You don't need a prominent high-street location. People are quite happy to go down an alley to find a wonderful gift shop with a good reputation.”
Whichever type of gift shop you decide to set up, knowing your customer is crucial. “The main thing is to have a thorough understanding if your customer base. This involves thorough research in your initial business plan, then constantly monitoring it to see how it is changing and adjust your stock accordingly,” explains Donnelly.
Training and regulations involved in running a gift shop
Although you don't need any qualifications to start a gift shop, many people who come to it from a non-business background find it useful to complete some basic commercial training.
Donnelly, for example, completed a law degree and also studied entrepreneurship. “These compensated for my lack of business experience and got me into a business way of thinking. When running a business, you have to do a lot of different tasks and make quick decisions. You also need to have a knowledge base in things like accountancy or marketing for example with which to make those decisions.”
Since you will be buying stock from different sources quality control is important, especially in key areas.
“Owners need to be aware of product safety, particularly when selling candles and things with batteries,” says Martinson of the GA. “Also food imitation regulations are becoming more important these days. For example, candles or fridge magnets that are made to look like food. We keep a close relationship with the trading standards body to help retailers keep abreast of the legislation.”
If you decide that adding a coffee shop is a good idea, you will need to get clued up on food hygiene regulations and be prepared for frequent visits from the local environmental health department.
How much does it cost to start-up a gift shop?
It is impossible to quote an exact figure for start-up costs since they will depend greatly on your location, the size of your shop, the products you sell and whether you rent your premises or buy a freehold.
The cost of buying freehold premises varies in much the same way as house prices vary throughout the country. Small premises in a less expensive region may cost £60,000 rising to over £300,000 for a large property. Yearly rental costs on leasehold sites, meanwhile, could cost from £8,000 upwards.
Once you have the premises you will need to fit out the shop. This means installing display shelves and cabinets for the gifts and cards, some of which may need to be lockable if you are selling expensive items. You will also need a counter, a cashtill, and a credit card swipe machine.
And, of course, you need something to sell. As a new business, suppliers will rarely give you credit, so initially all stock will have to be paid for up front. This could cost between £20,000 to £35,000 depending on the size of your shop and the type of items you sell. Finally you will need some working capital to keep you and your business going until sales start to take off.
When you add it all up, therefore, you are looking at a starting figure of at least £50,000, which could rise to over £300,000 if you are buying a freehold business in an expensive area.
How much can I earn as a gift shop owner?
This is a difficult question to answer, since there are many different types of shops and people go into the sector for different reasons. For some it is seen as a commercial venture, for others it can be a lifestyle choice.
Nevertheless, there is clearly money to be made in gift retailing if you are successful. One owner suggested that a market town gift shop, for example, should be turning over £200,000 to £250,000, from which you would get a gross profit margin of around £100,000, with rent, rates, staff costs and other overheads still to pay.
Therefore, an owner-manager with a reasonable size gift shop in a market town should be able to take £50-60,000 per year out of the business, assuming it's doing reasonably well.
Ways to increase your business' turnover and therefore how much you earn
There are a number of bows and ribbons that will add value to your business once you have established the core retail operation:
- Credit cards: The use of credit cards is a key area. If you don't accept them, customers will go to your competitors who do. Research has also shown that people buying on credit cards tend to buy more.
- Tax free shopping: If you have a lot of customers who are from outside the EU, you can offer them tax-free shopping. For example, the GA runs a VAT exemption scheme in association with Global Refund.
- Corporate gifts: Companies may be interested in buying a certain item in bulk with their company name engraved on it.
- Wholesale: If you find a particularly good product that no one is supplying, you might be able to set up a wholesale operation.
- Expand your gift shop business: Once you have perfected a look and feel for your shop, it shouldn't be difficult to copy it at another location.
- Diversification: This may be critical for survival if you are in a tourist area, since it will support out-of-season sales. Add-ons include accommodation, coffee bars, delis and newsagents.
- A business website: Many gift shops have a website, although often purely for marketing purposes since gift shoppers still like to see and pick up products.